AIG chief faces grilling

The embattled chief executive of American International Group told a congressional subcommittee Wednesday that he asked employees who received more than $100,000 in controversial retention bonuses to return at least half of the money in response to public outrage over the payments.

"We've heard the American people loudly and clearly the last couple of days," said AIG Chief Executive Edward Liddy. Some employees have volunteered to do so or return all of the bonuses, he said.

Noting that he came out of retirement in September to run the company after the government provided the first portion of a bailout that has now reached $182 billion, Liddy said he never would have agreed to the retention bonus plan put in place early last year. He called the $165 million in bonuses "distasteful."

But given the need for the employees to restructure the company and about $1.6 trillion in derivatives to prevent its collapse, Liddy said he decided the payments needed to be made.

"We weigh every decision we make with one priority in mind: Will this action help our ability to pay monies back to the federal government or hurt it?" Liddy said. "I know $165 million is a very large number. ... In the context of $1.6 trillion and the money already invested in us, we thought that was a good trade."

Lawmakers were eager to grill Liddy about the bonuses and the way AIG has been run, a controversy that has led to a push for legislation to tax the bonuses so the employees end up with little or nothing.

"There's a tidal wave of rage throughout America right now, and it's building up," said Rep. Gary Ackerman, D-N.Y. "And that rage is because the taxpayer knows they are the ultimate sucker on the list of who pays for all of the greed that has been going on in the marketplace for years and years."

The hearing was held after Treasury Secretary Timothy Geithner said Tuesday that the company would be required to pay the $165 million from corporate operating funds as part of the final terms for a previously announced $30 billion line of credit from the government.

In addition, the credit line will be reduced by the same amount.

Geithner said the Treasury determined that it could not block the bonuses, which came due Sunday, because of AIG's contracts to pay them. President Barack Obama has ordered his administration to explore all legal means to recoup them, and Geithner said his department was still looking at ways to do so.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said the government should sue to recoup the bonuses as the majority owner of AIG, arguing that the employees did not deserve them because of their poor performance.

Frank said he would have the committee vote on a subpoena to get the names of all the AIG bonus recipients if Liddy does not agree to release them.

Geithner came under fire from Republicans for not blocking the bonuses.

On Tuesday, Rep. Connie Mack IV, R-Fort Myers, became the first person to call for Geithner to resign or be fired.

"Quite simply, the Timothy Geithner experience has been a disaster," Mack said. "The Treasury Department is in disarray. Taxpayer dollars are being wasted. America's economy hangs in the balance. America needs and deserves a Treasury secretary who can truly lead us forward."